During 20X8, Zac Entity (ZE) purchases a call option on Astron
Entity (AE) shares for a premium of $10,000. The call option gives
ZE the right to purchase 1,000 AE shares for the strike price of
$50 per share. At the end of 20X8, the market price of AE shares is
$45 per share. How much will ZE pay if it wants to purchase 100 AE
shares?

a. $500

b. $4,500

c. $5,000

d. $10,000.

Castle Company purchases a financial asset for $10,000. The
asset is not purchased under normal market terms, and there is no
information regarding the fair value of the asset. The asset is
estimated to provide future cash receipts of $2,000 per year for
the next ten years. The interest rate for similar instruments is
8%. What value should the financial asset be recorded at on Castle
Company’s books?